money and banking
The current MD and CEOs of RBL Bank – R Subramaniakumar and Rajeev Ahuja, who was the interim MD and CEO – feel that heavy kitchen sinking may not be much needed. In an interview with Hamsini Karthik, Subramaniakumar, who has been selected for the RBL Bank 2.0 transformation process, says that the bank will stand for controlled development.
, There is a perception in the minds of investors that RBI has appointed an administrator without calling, especially considering your recent background with DHFL…
Youth: I am a career banker with an anchor banker profile. I headed Indian Overseas Bank thrice; He was also its chairman. At Indian Bank I scripted a turnaround where the stock went from ₹78 to ₹213 in just eight months because we got the strategy right. At PNB where I spent 33 years of my career, I led the transformation of the bank that Ahuja and his team had done in RBL version 1.0. Every role has its own status. I am here to ensure that a good bank becomes a better and ultimately the best bank. A universal bank needs someone who has an in-depth understanding of all banking aspects.
RBL has written a phenomenal growth story over the past decade in what I call RBL 1.0. It has developed and established in certain niche areas, and assumes leadership positions within the top 5 or 10. I’m going to work with an existing team that has addressed some specific areas. So why not use my expertise in other areas, so that the bank can move from being the best to the best. My view is that the assumption should be seen from the person’s ability to deliver because had the bank required resolution, it would have been done. But this is not the place for resolution.
Rajeev Ahuja
What was the reason for recommending the name of Mr. Kumar by the Board of RBL?
Ahuja: I was not part of the screening committee, but I can tell you it was done in a professional manner. There was an outside consultant expert who was involved in the process. The idea was that as the bank became more widespread it made sense that someone who did it did it on a large scale and complexity. I have known Kumar over the past 48 hours, and am very excited by the speed at which he can understand the requirements of the bank and what it will take to move this forward. Having him on board will give us a lot of ability and flexibility to change the way we engage with stakeholders. He addressed key people and if we just keep our heads down and keep executing we will come out stronger. To be honest, because of Kovid, all the difficult tasks are behind the bank. Kumar’s involvement can help us expand that opportunity.
As someone who has seen the bank go from Ratnakar to RBL 1.0 and now RBL 2.0 under a new management that may have some kitchen sink cleaning, how do you expect the staff to react?
Ahuja: We took a conservative provision in Q4 so that the team has breathing room to utilize the opportunity. We made additional provisions on restructured assets, which people generally do not do as they expect these accounts to come back. We have increased the PCR to 70 per cent. Our net NPAs were 1.4 per cent in Q4, and net restructured assets at 2.6 per cent, which is very respectable, considering we have just come out of the pandemic. The cost of FY23 credit will be significantly less than the previous year’s 50 per cent. If you look at it from a financial soundness perspective and a balance sheet perspective, we are in pretty good shape to tackle the opportunities in FY23. We have already started investing in sectors like housing and tractors and there will be a lot more. The fact is that we have nothing to drown in.
Growth or quality, what should be the priority here?
Youth: I don’t have any growth target yet, I’m just going with the current strategy paper which has been approved by the board. I am in the process of consolidating it. But development doesn’t mean I just fire a rocket in the middle of the road. We have an excellent person and their team sitting at the steering wheel and I can be a navigator for controlled development. The opportunities and prospects for RBL Bank are immense. We will explore alternative areas of capital lines along with our risk spread while maintaining their distinctive exposure to high NIM businesses. We will work on capital-light but marching heavy products.
At a time when RBL is trying to repair its loan book, the rates are going to be higher. Do you see this as a problem?
Youth: The bank is not making any corrections in the balance sheet. The niche areas in which the bank has command will continue. But the size of the cake is going to increase. This means, adding new products, the reach and scale of the overall bank is going to grow to retain its niche.
As a banker you are used to seeing NIMs above 4 per cent for many years, would you be okay to see if the number goes down and more products are added?
Ahuja: We have to look at what we’re doing, product mix and other elements of ROA. In our wholesale business, nowhere near 4 percent for the NIM trajectory; About 2% more likely because we are dealing with medium sized and large companies where we make money on cross-sells of the business. If you look at our foray into housing, which we started 18 months ago and is growing significantly, its operating expenses are huge right now, being delivered through the branch model. It’s also going to be a low-nim business. Some of these things have a slightly longer gestation period. So barring cards and microfinance, which are doing very well now, other businesses like housing, business lending and tractors (which is somewhat better) may not have high margins. But all of this together should lead us to a total debt cost of 2 percent which is a very respectable number and something that we can continue to do. In FY23, we should have pretty reasonable profitability, if not great. I would be very happy if we achieve 1 per cent ROI by the end of this year, which is within our reach.
What are the pockets that need to be filled in terms of manpower and risk assessment?
YouthPortfolio mix should be retail based on both sides of the balance sheet. The liability spread across retail will provide stability. Having a medium to medium ticket sized loan will provide a cushion for the loan book. MSME is a growing sector. RBI is coming down on the online lender and when that section becomes vacant, the borrowers will switch to the traditional bank and can avail the RBL clause. We are also looking at revenue generation through alternate business for existing customers. If we can increase the wallet share of existing customers with the bank’s new products, we can have a growing balance sheet with reasonable profitability.
Published on
13 June 2022